Capital Markets Day 2015

Capital Markets Day 2015 1 Nordea Capital Markets Day Shaping the future relationship bank London, 27 May 2015 Disclaimer ■ This presentation co...
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Capital Markets Day 2015

1

Nordea Capital Markets Day Shaping the future relationship bank London, 27 May 2015

Disclaimer ■ This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those expressed or implied by the forward-looking statements. ■ Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels. ■ This presentation does not imply that Nordea has undertaken to revise these forwardlooking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided. Neither Nordea, nor any of its directors, officers, employees, advisors or representatives shall have any liability whatsoever arising directly or indirectly from the use of this presentation. ■ This presentation is subject to Swedish law and any dispute arising in respect of this presentation is subject to the exclusive jurisdiction of Swedish courts. 3

Agenda Registration and coffee

08.30-09.00

■ Shaping the future relationship bank

Christian Clausen

09.00-09.20

■ Financial plan and targets

Torsten Hagen Jørgensen

09.20-09.40

■ Risk management

Ari Kaperi

09.40-10.00

Coffee break

10.00-10.30

■ Retail Banking

Lennart Jacobsen

10.30-10.50

■ Wholesale Banking

Casper von Koskull

10.50-11.10

■ Wealth Management

Gunn Wærsted

11.10-11.30

■ Concluding remarks and Q&A

Christian Clausen/All

11.30-12.00

Shaping the future relationship bank

CEO Long term commitment, have a plan, future oriented continue on the road we have set out on, Stable, trustworthy

Christian Clausen President and Group CEO

5

Nordea has delivered on its 2015 plan Commitments in 2015 plan

Nordea has delivered (Q4 2012 vs. Q4 2014)

Capital generation of EUR 4.9bn with 15.7% CET1 and 70% pay-out ratio

P

ROE 11.6%, ~13% if CET1 at 13%, ancillary income +9% and costs -5%1

P

Loan losses at 15 bps, below 10 year average of 16 bps

P

1) 2013 vs. 2015, excluding FX, and unexpected increase in performance related salaries and further costs to meet regulatory requirements in 2015

6

Strong Nordea track record Strong capital generation and stable returns at low risk1 Acc. dividend, EURbn

Acc. equity, EURbn

34

37

39

31 29 26 18

20

15 12

2005 CET 1 2 Ratio, % 5.9

2006

2007

2008

2009

2010

2011

2012

2013

2014 15.7

1) CAGR 2014 vs. 2005, adjusted for EUR 2.5bn rights issue in 2009. Equity columns represents end-of-period equity less dividends for the year. No assumption on reinvestment rate for paid out dividends 2) Calculated as Tier 1 capital excl. hybrid loans

7

Customer vision shaping the future relationship bank Customer vision for the future relationship bank

Easy to deal with…

…relevant and competent… Customer vision …anywhere and anytime…

…where the personal and digital relationship makes Nordea my safe and trusted partner

8

Focused business priorities enable the vision Nordea platform

Business priorities 2016-2018

Pan-Nordic platform with scalability

Simplify for scale and a forceful digital response

Superior Nordic distribution power and global capabilities

Expand on core strengths and drive cost and capital efficiency

Actively managed business portfolio with low volatility

Maintain a low risk profile

9

Industry transformation drives need to simplify Three transforming industry drivers

Balance sheet regulation

Operational regulation

Digitalisation

■ Paradigm shift

■ Increasing demands

■ Behaviour shifting fast

■ Mostly in place

■ Higher operational risk

■ Opportunity and threat

■ Increased efficiency

■ Complex and costly

■ Investments required

PPP

PPP

PPP Simplification

10 

Simplify for scale Simplification program – priorities and benefits

4-5 years of the journey remains

Increased scale, efficiency and agility serving all customers from one common platform

Reducing # of products and align data records

Automating processes and increasing commonality

An end-to-end digital response and execution of the customer vision

Investing in new, common core IT systems 30-35% increase in annual IT development spend, insignificant P&L impact medium term

Stable and resilient operation, compliant and in control

11 

A forceful digital response Relationship banking is turning digital fast

End-to-end digital response required 18

■ Front-end solutions will not suffice ■ Automated end-to-end processes across the full value chain is a must

8 3

Branches 0

Online advisory meetings Share

Q1/10

■ Consistency and endurance in execution to unlock benefits

Q1/15

10%

3%

Dec 2014

Mar 2015

Ability to execute

Transactions Millions

Mobile

■ Digital response required

Level of digital response

12 

Expand on core strengths: a unique Nordic relationship base Nordic household relationships1

Nordic large corporate relationships 100%

Important relationships

Nordea 80%

~10 Peer 4

Peer 3

60%

Peer 5

Peer 2

40%

~7

~4

Peer 1

~4 ~3

20%

0% (60)

(40)

(20)

0

20

40

60

80

Nordea

Peer 1

Peer 2

Peer 3

Peer 4

Greenwich Quality Index2

Unique Nordea position Size and competence = relevance Multi-local presence = intensity

Ambition to be #1 in each retail market on customer and employee satisfaction, and profitability

1) Retail and Private Banking customers, millions 2) Difference from average

13 

Business model and priorities ■ Leading Nordic platform integrating equities, bonds, lending and risk management ■ A return-driven culture with strong talent

Private Banking

Life & Pension

Asset Mgmt.

Global capabilities in focus1

Capital Markets

Expand on core strengths: capabilities on par with int’l peers

#1 Corporate bonds and loans #1 Nordic Equity Trading

#1 in the Nordics by AuM

Top Ten fund manager in Europe2

#1 in the Nordics by premiums 24% Market return product market share

#1-2 position in each country Largest Nordic int’l private bank

■ Centralised, highly scalable production platform ■ Strengthen distribution, leading product range for low yield environment ■ Leading Life & Pensions platform, successfully transformed to market return company ■ Next generation retirement offering ■ Leading in Nordic wealth planning and Global investment management solutions ■ Increase capacity in Sweden and Norway

1) Ranking in Nordic region 2) Only European fund manager consistently in European Top 10 for net fund sales the past three years

14 

Expand on core strengths: building the efficient business model Free up resources through increased capital and cost efficiency

Capital efficiency

From balance sheet to competence and advisory intensive business model

Free up resources for investments in simplification,

compliance and operational risk, and Cost efficiency

Continuous cost control and optimisation

growth areas

15 

Maintain a low risk profile Priorities ■ Sustain forward looking and holistic risk appetite framework

12.2 12.8 12.0 11.5 10.6 12.3 11.7 12.5 10.1 12.1 11.1 11.5 10.8 10.5 11.4 12.0 11.2 11.8 14.3

9.5

8.1

11.3

No quarter below 8%, every year above 11%

15.8 16.2 15.0 14.4 13.9 12.0 11.7

19.1 18.1

21.5

23.6 18.0

20.0

22.4

Nordea ROE track record1, %



16 risk boundaries across all risk types



Close monitoring of leading indicators



Deep dives on specific risk areas for appropriate action



Active use of stresstesting and scenario analyses

■ Maintain relationship strategy and sustain a large, well diversified client base 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 20132014 Q1 2015 2006 2015

■ Broad set of diversified products

1) ROE adjusted for restructuring costs in 2011 and one-off related items in 2014

16 

Summary of priorities 2016-2018 Business priorities 2016-2018 and strategic targets

Simplify for scale and a forceful digital response

One scalable common platform Anywhere and anytime – efficient, agile and resilient

Expand on core strengths and drive cost and capital efficiency

Leading customer relations Number 1 bank for each customer

Maintain a low risk profile

Increased free capital generation All business areas contributing

17 

Financial plan and targets

CFO Long term commitment, deliver on the financial plan

Torsten Hagen Jørgensen Group CFO

18 

Cost plan 2013-15 delivering the targeted 5% reduction with all key elements contributing, but some unplanned events Cost efficiency clusters in 2015 plan

Streamline physical distribution

Optimise advisory services

Reengineer processes

Transform premises

Enhance digitalisation

Streamline IT

Optimise external spend

P P P P P P P

Cost development 2013-2015 -5%

5,040

-6.7%

~250

~190

27 ~4,790

76 ~4,700

2013

Net cost Underlying Unexpected Further reductions costs increase in costs to 2015E performeet mance regulatory related requirements1 salaries

FX2

Expected Reported costs 2015E

1) Not part of original 2015 plan 2) Based on FX rates as per 1 May 2015

19 

Nordea market commitments and financial priorities 2016-2018 Market commitments

Strong capital generation and efficiency with return of excess capital to shareholders

Financial priorities

Improved income mix & growth

Continued cost efficiency

ROE above the Nordic peer average Disciplined capital management

Maintain a low risk profile based on actively managed and resilient businesses

Highly stable CET1 ratio

20 

Continued cost efficiency Key cost drivers and initiatives 2016-2018 ■ Moderate salary drift

Underlying cost drift

Cost efficiency

Selected growth areas

■ Premises and other external contracts, e.g., procurement, linked to general inflation

1.5-2%

■ Continue branch optimisation & remove manual cash handling ■ Simplify & automate services, processes and products ■ IT and consultancy insourcing

50%

Remote

+3 pp

1) Assuming constant capital requirement (EC/REA) as for 2014 (~15%)

51 

Wholesale Banking has delivered on its 2015 plan Commitments in 2015 plan

Wholesale Banking has delivered (‘12 vs. ‘14)



Achieved #1 market position



Balanced income mix



One Nordic operating model



Improved capabilities at unchanged cost



Disciplined pricing, business selection and capital reduction

P

Reposition the business

Develop organisational platform

P

Return-driven culture

P 52 

Successful Wholesale Banking journey 2011-2012

2013-2014

2015-

Leveraging the platform

WB formation

Transforming the business model & culture

Business model & culture

WB formation

WB formation

Intensity & Relevance

53 

Business priorities leveraging the platform Nordea platform

Pan-Nordic platform with scalability

Strategic focus areas 2016-2018

Further leveraging customer franchise

Strengthen wholesale banking capabilities

Superior Nordic distribution power and global capabilities Effective capital management

Actively managed business portfolio with low volatility

Continued prudent risk management

54 

Further leveraging customer franchise Leading Nordic Capital Market and Advisory Franchise Nordic Corporate Bonds

Nordic IG Corporate Bonds 5 744

3 720

Nordic peer

3 902

Nordic peer

Nordic peer

3 860

Nordic peer

Nordic peer

2 511

Nordic peer

Nordic peer

2 479

International peer

Marine Syndicated Loans (USDm) 8 152 Nordic peer

Nordic HY Corporate Bonds

3 436 2 850 2 174

1 949 Nordic peer Nordic peer Nordic peer Nordic peer

551

Nordic ECM International peer

1 397

Nordic peer

1 010

Nordic peer

741

International peer

424

113 794

6 240 5 484

Nordic peer

94 161

International peer

6 314

International peer

International peer

5 918

Nordic peer

3 244

Nordic peer

50 621

Nordic peer

3 079

Nordic peer

48 390

International peer

3 309

4 657

Source: Dealogic, Merger Market, NasdaqOMX

Strength in Transaction Services #1 in Cash Management 2015 in the Nordics #1 in Trade Finance Bank 2015 in the Nordics #1 in Cash Management 2015 in Sweden #1 in Trade Finance Bank 2015 in Sweden, Finland and Norway #1 in Cash & Liquidity Management 2014 in the Nordics #1 in Payments & Collections 2014 in the Nordics #1 in Financial Supply Chain Management 2014 in the Nordics

#1 in Trade Finance in the Nordics

Nordic peer

11 943

Nordic peer

Nordic Equity Trading¹

7 626

Nordic Syndicated Loans

63 783

8 054 6 695 4 975 3 520

Nordic M&A International peer Nordic peer International peer International peer

22 162 18 181 15 343 14 528 14 278

1) Only Nordic peers included

Leader in Risk Management #1 in Interest Rates Derivatives 2014 in the Nordics #1 in Foreign Exchange 2014 in the Nordics #1 in Credit 2014 in the Nordics and in Sweden, Denmark, Finland and Norway #1 in Fixed Income 2014 in Norway #1 in Interest Rates Derivatives 2014 in Norway #1 in Foreign Exchange Provider 2015 in Finland and the Nordics

55 

Strengthen Wholesale Banking capabilities Leading Wholesale Banking platform

Priorities ■ Support equity-related activities

Bank lending

Capital markets financing



■ Key additions to Investment Banking 

Corporate/ Institutional customer

Transaction banking

Risk mgmt, advisory

Selective strengthening of international distribution

Improve competence pool in selected markets and products

■ Adjust FICC to cyclical and structural changes 

Digitalisation/e-Markets



Capitalising on strong platform via increased distribution

■ Strengthen transaction banking 

New simplified payment platform

Culture & Capabilities

56 

Effective capital management REA reduction (EURbn) 78

Key initiatives

5

Management of low-yielding relationships -18

53 -11

Active business selection/ de-selection >50%

2018

2014

Bus. selection

Efficiencies

CRD IV

2011

Balanced business mix

Capital hedging

57 

Continued prudent risk management Diversified customer franchise Income 2014, %

Other 12%

Russia 12% SOO 15% CIB SE 22%

Items at fair value 28%

Net fee & com. Income 26%

Key messages

CIB DK 16%

Strong relationships, staying close to the customer CIB FI 13%

CIB NO 10%

More balanced income with higher share of commission income

Well established process for managing business and portfolio risk Net interest income 46%

Loan losses down by EUR 216m FY 2012 to 2014

58 

Summary

■ #1 wholesale bank in the Nordics

Income

■ Capital markets financing and stronger advisory Maintain

Capital

■ Disciplined capital management

■ Business selection, capital-light solutions

#1 Position

■ Selective platform investments

Cost

■ Operational streamlining and efficiency

Return

■ Medium term cost efficiencies

■ Enhanced franchise quality

Risk

Above peer average

■ Distribution and structuring ■ Well-diversified business mix

59 

Wealth Management Gunn Wærsted Head of Wealth Management 60 

Wealth Management in brief Strong customer franchise

Well diversified business

Growing business Profit, EURm

#1

Asset Management Int. 18%

903

Denmark 32%

729 632

#1

#1

Life & Pension

Private Banking

Sweden 23% Finland 18% Norway 9% EUR 290bn AuM

2012

2013

2014

Leading Nordic wealth manager with global reach ■

#1-2 position for each business in each country



Integrated value chain and global scale



Cost and capital efficient business model

61 

Wealth Management has delivered on its 2015 plan Commitments in 2015 plan

Wealth mgmt. has delivered (2012 vs. 2014)

Colours

Extra Colours 103 172 206

Key Wealth Management value drivers

239 178 137

Key ambitions and initiatives  Leverage the strength of a diversified business model and broad distribution capabilities

Capitalise growth momentum

117 204 208

Cost / Income 46% (-9 pp)

 Elevate Retail Banking customers to Private Banking  Accelerate external customer acquisition Private Banking

204 199 178

 Leverage the strong momentum in AM institutional sales  Enhance accessibility, advice and transactions through online and multichannel

Enhanced value propositions

Income CAGR 9.1%

211 157 155

 Roll-out enhanced wealth planning concepts and advisory skills  Develop advisory concepts and tools  Develop and launch new products and solutions

Profit CAGR 19.5%

182 185 186

 Improve operations, continue to extract benefits of an integrated wealth value chain

Efficiency & prioritisation

242 206 134

 Improve IT efficiency through offshoring and investments to reduce complexity  Improve frontline efficiency, to increase the number of right clients per advisor  Migrate to market return products in Life & Pension

206 159 182

RoCaR 32.4% (+10.1 pp)

lours

127 127 127 191 191 191

76 116 154

96 

+ EUR 35bn Net Flow

P P P P P 62 

Strong growth through consistently high flow Assets under Management (AuM), EURbn

Acc. Flow

Acc. Market appreciation

Key growth initiatives in 2015 plan Growth through external distribution GFD1 net flow, EURbn

4.8

290.0 1.9

2.2

2012

2013

2.5x

2014

Growth through bancassurance Market return premiums, EURbn

+103.9 3.2

2012 +91.5

4.2

5.1 1.6x

2013

2014

Focus on client acquisition Net flow per private banking relationship manager, EURm

6.1 94.7 2.0 2003

2015Q1

2012

3.1x

3.3

2013

2014

1) Global Fund Distribution

63 

Looking ahead: Well positioned to capitalise on trends Trends

Nordea wealth management platform

Demographics

Strong customer franchise

Low yield environment Leading advisory and product capabilities

Globalisation Well diversified business across markets and business lines

Regulation

Digitalisation

Efficient and scalable operating model

64 

Three strategic focus areas Nordea platform

Strategic focus areas 2016-2018

Pan-Nordic platform with scalability

Client Relationships

Superior Nordic distribution power and global capabilities

Advice & Solutions

Actively managed business portfolio with low volatility

Efficiency

65 

A leading European asset manager Scalable business model

Platform

AuM in AM, EURbn

Cost/Income, %



Active management with leading Multi Assets capabilities



Cost level ~30% below European peers3

173.9



Only European asset manager consistently on top 10 in European Fund sales 2012-144

38



Product offering of strategic importance in the savings and wealth offerings

55 116.3

137.8

2011

2012

146.2

2013

2014

Strategy and key priorities

Value drivers

 Expanding capacity to service new and existing Global distribution partners

■ 30.5% CAGR Profit (last 3 years)

 New investment products creating value for customers in the low yield environment

■ 37 bp Income/AuM (+4 bp last 3 years) ■ 14 bp Cost/AuM (-5 bp last 3 years)

 Further leverage multi asset investment solutions

■ 45% 4-5 star Nordic rated funds as of 2015Q11

 Continued investments in platform robustness and scalability

■ 99 bp2 investment outperformance last 36 months

1) Morningstar 2) As of Q1 2015. GIPS compliant. Before fees 3) McKinsey Asset Management Survey 2014 (Cost/AuM): peer group “Western European Bank Owned Asset Managers” 4) Morningstar (incl. open-ended-funds, FoF and ETFs, excl. Money Market)

66 

The #1 Nordic pension provider Transition to capital efficient pension provider Trad.

Gross written premiums, EURbn 6.7 5.9

5.6

2.6

1.6 4.1

2011

2012

2013

■ Successfully transformed to market return company

7.6 1.0

■ Focus on bancassurance with low distribution cost

6.6

■ Estimated Nordic market share of 24% within market return product segment

1.2

5.5 3.3

MRP1

Platform

2014

■ Product offering of strategic importance in the savings and wealth segment

Strategy and key priorities

Value drivers

 Building next generation retirement offerings to fuel additional growth

■ 29.2% CAGR Profit last 3 years. and 15% RoE2 2014

 Investments in IT and Operations platforms to seize cost reductions

■ 37% C/I (-21pp last 3 years.) ■ 25.8% CAGR Market return premiums, share of AuM +16pp to 52% ■ Average guarantee 2.2%

 Solvency II transition without equity capital injection  RoE 18% in 2018

1) Market return products 2) Adjusted for changes in fee reservation account and profit sharing in Sweden. 17% ex. adjustments

67 

The #1 Nordic private bank Increased private banking footprint

Platform

AuM in PB, EURbn

■ #1-2 position in each Nordic country, largest Nordic International private bank

61.0

69.4

AuM/Advisor, EURm 77.3

84.4

■ Well functioning referral model ■ Cost/Income ratio 9pp below European peers1

133

■ 110,000 Private Banking Clients

96 2011

2012

2013

2014

Value drivers

Strategy and key priorities  Increase capacity in Norway and Sweden  Developing new digital offerings

■ 11.8% CAGR Profit ■ 64% C/I (-4pp) ■ 35% RoCaR 2014 ■ Customer Satisfaction Index +8pp to 77 since 2008

 Enhancing solutions for wealth planning and investment advice  Continued shift to managed solutions  Enhanced offerings for selected segments, incl. UHNWI and business owners  Focusing on higher-AuM customers, lower-AuM clients referred to Retail

1) McKinsey European Private Banking Survey 2014

68 

High growth going forward, costs in control Net flow, % of AuM

Cost/Income, %

61

55 52 >5% of AuM 2016-2018

4.7% p.a.

Q1/11

Q1/12

Q1/13

Q1/14

Q1/15

46

2011

2012

2013

Costs in control

2014

69 

Summary

■ #1 Wealth Manager in the Nordics

Income

■ Well positioned to capitalize on trends ■ Track record of Nordic and International growth

■ Focusing on higher margin business

Margins

■ Leveraging advisory and solutions capabilities

Maintain

#1 Position

■ Scalable, cost-efficient platforms

Cost

■ Operational streamlining and efficiency ■ Further investments in platforms

Capital

Profit Growth

■ Life & Pensions successfully transformed to market return company ■ Solvency II transition without equity capital injection

70 

Concluding remarks & Q&A

Concluding remarks and Q&A

71 